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Financial Fraud and Older Americans


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Title: Financial Fraud and Older Americans

Financial Fraud and Older Americans
  • Kelly May
  • Kentucky Department of Financial Institutions

What Is DFI?
  • Department of Financial Institutions state
  • Securities Division investment advisers,
    brokers, issuers, offerings
  • Nondepository Institutions Division mortgage
    lenders and individuals, check cashers, other
    lenders, money transmitters
  • Depository Institutions Division
    state-chartered banks, trusts, credit unions
  • Licenses and registers firms and individuals
  • Conducts examinations
  • Investigates complaints or potential fraud
  • Provides educational materials for consumers

Seniors Are Targets
  • 31 of all securities enforcement actions involve
    senior investment fraud
  • Seniors have built up savings and con artists
    know it
  • Large population Baby Boomers
  • Aging affects everyone
  • EIFFE Prevention Program
  • Goal to train physicians, adult protective
    services professionals and senior caregivers to
    identify and assist those individuals at risk of
    elder investment fraud due to mild cognitive
  • http//

Why Seniors Are Victims
  • Top behaviors that put those age 50 more at
  • Opening and reading all junk mail
  • Attending free lunch seminars
  • Entering drawings to win a free prize
  • Inviting salespeople into the home
  • Older fraud victims more likely to do these
  • Scams are underreported only 25 of victims 50
  • Victims 55 were significantly
  • Less likely to acknowledge they were defrauded
  • Less likely to report victimization

Financial Abuse Has Costs
  • National
  • 1 in 14 cases reported abuse/neglect
  • 1 in 25 cases reported financial exploitation
  • More frequently committed by family/caretakers
  • Increase in age also increases likelihood

Most Common Types of Abuse Most Common Types of Abuse
26.7 Self Neglect
23.7 Caregiver Neglect
20.8 Financial/Material Exploitation
13.6 Emotional/Psychological
12.5 Physical
0.7 Sexual
2 Other
Financial Abuse Has Costs
  • National
  • More than 7.3 million older Americans have been
    victimized by a financial swindle
  • Thats 1 in 5 citizens over age 65!
  • Kentucky
  • 45,048 reported cases of abuse or neglect in 2007
  • How It Relates
  • Multiple forms of abuse may occur simultaneously
  • Reporting one type may uncover more
  • If family/caregiver is culprit, its up to
    someone else to report it

What Is Financial Exploitation?
  • KRS 209.020(9)
  • Obtaining or using another persons resources,
    including but not limited to funds, assets, or
    property, by deception, intimidation, or similar
    means, with the intent to deprive the person of
    those resources
  • Financial exploitation is one form of elder abuse
  • May include securities fraud and lending fraud
  • Mandatory reporting of elder abuse
  • 800-752-6200
  • Its the law

Signs of Abuse/Exploitation
  • Mail piled up, unpaid bills
  • Sudden/unexplained banking behavior changes
  • Bank accounts emptied
  • Abrupt changes in a will or financial document
  • Disappearance of funds/valuables
  • New companion, adviser or power of attorney
    making financial decisions
  • Caregiver paid too much or too often
  • Excitement about winning sweepstakes/lottery

What Are Securities?
  • Securities are documents/contracts that establish
    an investment that is expected to profit in some
  • Securities fraud takes many forms
  • Fraudulent product/offering
  • Unsuitable investments for investor
  • Unlicensed adviser/broker
  • Unregistered product
  • Theft/misappropriation of funds

Common Investment Fraud Schemes
  • Unsuitable investments
  • Ponzi Scheme Madoff and others
  • Oil and gas scams
  • Free-lunch seminars
  • Internet scams/social networking scams
  • Unlicensed individuals/unregistered products
  • Abusive sales practices
  • Fraudulent products
  • Affinity fraud
  • Scam technique
  • Preys upon members of identifiable groups
  • Relies on trust

Affinity Fraud
Video clip from The Lure of Money, as used in
the DFI-produced Buyer Beware
Problematic Lending
  • Any of a number of fraudulent, deceptive,
    discriminatory or unfavorable lending practices.
  • Some of these practices are illegal, while others
    are legal but not in the best interest of the

Illegal Lending
  • Advance fee schemes
  • Advertise online or use regional trade
  • Company requests a payment up front for the
    first payment or insurance
  • No loan is provided
  • The up-front payment cannot be recovered
  • Internet payday loans
  • Internet consumer installment loans
  • Neither of these are licensed in Kentucky
  • Kentucky law states that an unlicensed lender is
    not entitled to receive any form of payment
  • DFI may issue a cease and desist on the
    borrowers behalf

Legal (But Costly) Lending
  • Store-front payday lenders
  • Sold as short term solution
  • High interest rate triple digit APR
  • Kentucky requires a check to be presented at the
  • Debt settlement companies
  • Companies advertise that you can be debt free in
    36 months or we can reduce your loan debt by up
    to 50
  • Enrolling in debt settlement programs typically
    worsens financial situation
  • Reverse mortgage products

Reverse Mortgages
  • Home Equity Conversion Mortgage or HECM
  • Home equity is exchanged for cash
  • Loan balance increases interest and fees are
    added to the principal balance monthly
  • Does not require repayment during the borrowers
  • Who qualifies?
  • 62, reside in home, have substantial equity
  • Costs
  • Origination fee, third party charges, mortgage
    insurance premium, interest, servicing fees

Reverse Mortgage Tips
  • Do not decide about a reverse mortgage alone
  • Beware of someone pushing a reverse mortgage who
    tells you what to do with the proceeds
  • Understand the terms know your alternatives
  • Beware of limited time only offers
  • Do not deal with an unlicensed lender
  • Do not sign documents you dont understand or
    that have incorrect information
  • Do not provide false information to qualify
  • For More Information
  • AARP
  • FTC
  • HUD http//

Red Flag Promises
  • Profit guaranteed!
  • High return no risk!
  • For YOU only
  • Today only (limited time)
  • Pay a fee now to secure the deal (advance
  • Cash only
  • Make the check out to me
  • Ill get you the paperwork later
  • Trust me! (affinity fraud)

Other Red Flags
  • Offers too good to be true
  • Inability to contact a company representative
    with questions
  • Charging a fee for credit counseling/repair
  • Requesting personal information over the
  • Unlicensed lenders, advisers or brokers

How to Avoid Scams 4 Easy Steps
  • End calls
  • Register on Do Not Call List
  • Be skeptical of unsolicited calls
  • Just say NO
  • Have a refusal script/plan to get off the phone
  • Have a buddy to help get out of high-pressure
  • Cool off
  • Take your time/wait before buying
  • Dont trust testimonials beware of investment
    hot tips
  • Check it out
  • Do your homework before signing any contract
  • Get it in writing read the fine print
  • Check out the source check references
  • Provide accurate information
  • Know your right to cancel

Why YOU Should Help
  • Often in cases of elder abuse, the seniors are
    unable to protect themselves
  • Caregivers and family members are often the
  • YOU as a service provider may be the only
    person who will speak up

How to Report
  • Report investing or lending fraud to DFI
  • Securities Division (investing)
  • Nondepository Division (lending)
  • http//
  • 800-223-2579
  • 502-573-3390
  • Report other elder abuse/financial exploitation
    to Adult Protective Services and/or local
  • Elder Abuse Hotline
  • 800-752-6200

Consumer Resources
  • Other investing contacts
  • FINRA BrokerCheck
  • SEC Investment Adviser
  • KY Dept. of Insurance http//
  • SECs EDGAR Database
  • Other lending contacts
  • Consumer Financial Protection Bureau 855-411-2372
  • Protect My Kentucky Home 866-830-7868
  • Neighborworks/Homeownership Preservation
    Foundation 888-995-HOPE www.foreclosurehelpandhop
  • HUD 800-569-4287 http//
    UD?src/ homeownerhelp